The Eurozone crisis is part of the global turmoil that began in 2007 as a US real estate crisis, unhealthy became a global banking crisis, turned into a global recession, and thus gave rise to a sovereign debt crisis. At the end of 2011 there is a risk of returning to a banking crisis in Europe and elsewhere. At the heart of bank weakness lies private and public debt accumulated during the period of intense financialisation in the 2000s.

The Eurozone crisis is part of the global turmoil that began in 2007 as a US real estate crisis, became a global banking crisis, turned into a global recession, and thus gave rise to a sovereign debt crisis. At the end of 2011 there is a risk of returning to a banking crisis in Europe and elsewhere. At the heart of bank weakness lies private and public debt accumulated during the period of intense financialisation in the 2000s.

Read the full report here

The Eurozone crisis is part of the global turmoil that began in 2007 as a US real estate crisis, became a global banking crisis, unhealthy turned into a global recession, pills and thus gave rise to a sovereign debt crisis. At the end of 2011 there is a risk of returning to a banking crisis in Europe and elsewhere. At the heart of bank weakness lies private and public debt accumulated during the period of intense financialisation in the 2000s.

The turmoil in the Eurozone is due to the global crisis of financialisation that broke out in 2007. But it is also due to the biased nature of the European Monetary Union (EMU). Systematic pressure on labour has intensified the disparities of competitiveness among Eurozone members, doctor buy case splitting the Eurozone into core and periphery.

The turmoil in the Eurozone is due to the global crisis of financialisation that broke out in 2007. But it is also due to the biased nature of the European Monetary Union (EMU). Systematic pressure on labour has intensified the disparities of competitiveness among Eurozone members, splitting the Eurozone into core and periphery.

Read the full report here.

The public debt crisis of Greece and other peripheral eurozone countries has the potential to harm the European Monetary Union. But the eurozone project has already inflicted damage onto Greece and other peripheral countries. There are two related reasons for the crisis: first, buy the skewed nature of monetary union and, pharmacy second, the economic upheaval of 2007-9.

Monetary union has removed or limited the freedom to set monetary and fiscal policy, thus forcing the pressures of economic adjustment onto the labour market. Guided by EU policy, eurozone countries have entered a „race to the bottom? encouraging flexibility, wage restraint, and part-time work. Labour has lost out to capital across the eurozone. The race has been won by Germany squeezing its workers hard in the aftermath of reunification. The eurozone has become an area of entrenched current account surpluses for Germany, financed by current account deficits for peripheral countries. Monetary union is a „beggar-thy-neighbour? policy for Germany, on condition that it beggars its own workers first.

The crisis of 2007-9 compounded the predicament of peripheral countries because of the monetary and financial structures of the eurozone. The crisis resulted in extreme shortage of liquidity for European banks. The ECB intervened, lending freely and making it possible for banks to start dealing with their weak position. But ECB reaction was very different in 2009 when states faced growing borrowing needs due to the crisis. The eurozone left each state to fend for itself in the financial markets. The ECB watched as interest rates rose, financial institutions speculated against state debt, and state bankruptcy raised its head.

Confronted with a public debt crisis, peripheral countries have been forced by the eurozone to impose harsh austerity. Yet, until early 2010, they have received no bridging loans to ease the pressure. This is grossly damaging, and offers no assurances of future growth. In effect, peripheral countries have been forced to accept IMF conditionality, but without an IMF loan.

Better policy alternatives are available, but they involve radical social and economic change. One option would be to reform the eurozone by relaxing fiscal constraints, introducing an enlarged European budget, guaranteeing a minimum wage, and providing unemployment insurance. A more radical alternative would be to exit from the eurozone, nationalising banks and other key areas of the economy as well as introducing industrial policy. Under all circumstances, peripheral countries face hard choices involving social conflict.

The 3rd Congress of the European Left is taking place as more and more unbearable sacrifices are imposed on European people. Indeed, in the vast majority of European countries, programmes of public spending cuts, of super-austerity, of liberalisation of public services and the labour market are being implemented. To generalise these policies, countries, with the full complicity of their governments are being placed under custody of the European Commission, the European Central Bank (ECB) and other institutions such as the IMF.

These policies are presented as a necessary response to the financial and economic crisis. But this is a crisis of capitalism, and of its current globalised and financial form. This crisis also impacts on the environment, energy, food, cultural and moral values. Therefore this crisis finds expression at all political levels and in all societies marked by the ruling capitalist mode of production and similarly at the EU level with its recent orientations, neoliberal policies and institutions.

The current debt problem constitutes a new phase of the protracted crisis. It has its roots in the economic and political developments of the last 30 years. Interlinking the multiple causes of the crisis, it is increasingly impacting on people’s everyday lives.

We, the Party of the European Left, together with other socialist, communist and red-green parties and organisations – widely regarded as the current plural European left, oppose these neoliberal policies and structures applied to the EU via successive treaties up to and including the Lisbon treaty.

The responsibility for these policies lies with the coalition formed by European , liberal and social-democratic parties that has dominated at the European and national level. We seek to present a political alternative to the neoliberal model. Given the widespread use of austerity, new resistance is developing across Europe. The major challenge facing the Left is to set out alternatives, encourage this resistance, and mould from it a movement for an alternative vision of civilisation committed to solidarity. We do this in the name of a social, ecological and peaceful Europe.

Ever firmer adherence to the Stability Pact and the EU 2020 strategy, modelled on IMF structural adjustment programmes, will not lead to the end of the crisis: on the contrary, it heralds the prospect of aggravated distortions, tensions, authoritarianism and social inequality. There is a risk of economic collapse, massive exacerbation of poverty and precariousness, and the destruction of the social model and European civilisation itself. There is a risk of further depression within the Euro-zone, not to mention the insurmountable problems imposed on other countries, such as the United Kingdom, Hungary, Romania or the Baltic countries. There is a risk of powerlessness in the face of the challenges posed by the ecological question. There is a serious risk of strangulation of democracy, of authoritarian “governance” of member states led by the interests of the market, and the management of national economies by the Commission, the ECB and the IMF.

There is already a substantial threat that the EU´s legitimacy crisis will worsen, that a lack of democratic impetus and of solidarity among the scorned and excluded who are unable to enforce their rights and decide their future will bolster the ascent of the ultranationalist, xenophobic and racist ideas of the extreme right.

There is a mounting threat to peaceful coexistence and to national minorities within the EU and the possibility of achieving real equality between women and men is facing significant obstacles. This involves the aforementioned tendency towards dramatic cuts, as well as rollbacks on standards in gender democracy and non-discrimination against minorities within the EU and beyond. More and more social care work is being delegated to families, i.e mostly to women as unpaid labor. This is the root of many women’s poverty and lack of economic self-determination.

It is not people in Europe, the working as well asunemployed, students and those in training, the elderly, women and children, the sick and disabled, the poor and the low and middle-income earners – who should pay for this crisis.

No, it is time for radical policy change. This policy change must guarantee that those who are responsible for the crisis will pay for it. Sustainable regulation must be developed, taking the banking and credit system into public control and re-orientating it towards social and ecological aims. Concrete steps can and should be taken to free EU and national government policymaking from the grip of financial markets, to turn the logic of profit into a new logic of human development based on social justice and sustainable ecology.

That is the current path of realism. That is an approach in the interests of European countries and their peoples. With the constructive will to formulate alternatives with which we can enter into a broader dialogue with people –and to organise a common struggle – we present the following proposals.

These proposals are not simply to be taken or to be left, but are intended to evolve in an open debate among European people and movements.

Scientific Council ATTAC-Germany, rx march 2011The public debt crisis can only be overcome through fundamental reforms of the global financial system as well as the EU.Introduction: Europe at the crossroads
The Euro is in danger. This danger comes from those who claim to be its saviours in the current crisis – from the German government, the parties supporting it, and most of the German media. They believe that responsibility for the crisis lies mostly with those members of the Eurozone that have trouble servicing their debt, and have therefore been forced to subject themselves to the EU’s as well as the IMF’s socalled ‘conditionalities’. In a rerun of the last decades’ debt crisis in the countries of the global South they are pushing for savage cuts in welfare spending. They are demanding cuts in public sector wages, and the limination of infrastructural spending. In short, the social and cultural rights of citizens are being trampled on, at the same time as collective sovereignty is being curtailed. The mere rump of a ‘European Social Model’ agreed some 11 years ago in Lisbon is being silently buried in this financial crisis of the banks and the debt crisis of the states.READ FULL DOCUMENT

This years biggest and most far reaching reforms of EU legislation are by far the ones on economic governance. At the moment the pact on competitiveness, or the europact as some call it, cost is the most prominent in the debate. And for a reason. The europact contains a number of benchmarks on economic policy making in member states that have outraged trade unions and have created strong debate in many countries. In the pact the eurozone and other member states who have decided to join, ed vow to keep wages low, implement reforms on pensions, and to keep social expenditure at a “sustainable” level. In itself major steps, but it’s not until the europact is understood in connection with the other proposals on economic governance, that the scale of the problem is clear.

The following is intended to give an overview – a crash course in future economic governance of the European Union, if you like. I’ll end up with a description of the europact and an assessment of how the pact fits in with the other proposals on economic governance. That question, I would argue, frames the drama of the EU summit on the 24-25th of March.

THE EUROPEAN SEMESTER (ADOPTED)

The first reform has already been adopted. Under the so called “European semester”, member states are to hand in the draft state budgets for the coming year. After the Commission has scrutinised the documents, it will draft comments for the Council to consider. In July, the Council then gives “policy guidance” to all member states.

The Commission gives its advice on the basis of its Annual Growth Survey. This years edition emphasises the need for pension reforms in member states. So it seems some major issues are at stake here. The question is to what extent this will influence decision making at the national level. It is quite groundbreaking in itself that the Commission and the Council will discuss state budgets in most cases well before a final draft is presented to national parliaments. A Danish professor has argued that the package of reforms of economic governance as a whole will have the same influence on “fiscal policy” as the nuclear bomb had on security policy. His argument is not that strong measures will force member states to comply, but rather that most governments will strive to comply with EU standards on budgets to avoid sanctions in the first place.

The European semester is the building block in the middle of all the reforms. It provides a spelt out procedure to deal with the other elements of economic governance. Taken alone, the semester doesn’t include sanctions. But several other building blocks do.

REFORMS OF THE STABILITY PACT (TO BE ADOPTED IN JUNE)

In September last year, the Commission published six pieces of draft legislation – sometimes referred to as “the sixpack”. All have been approved with only minor proposals for amendments by the Council. According to the plan, they are to be voted on in the European Parliament in April, and the final decision to be taken in June.

Four of the proposals concern the Stability Pact. Under discussion is mainly how to enforce the two key thresholds of the Stability Pact; that member states are obliged to keep deficits on state budgets below 3 per cent, and to keep debt below 60 per cent. According to the original rules, members of the eurozone are to be fined if they cross these two thresholds, but in practice the rules on sanctions have not been upheld. That is about to change in various ways:

– In order for a fine to be prevented by the Council, there has to be a qualified majority against the imposition of a sanction.

– Member states are obliged to have “rules” in place eg. in national legislation, on “numerical fiscal rules that effectively promote compliance with their respective obligations” such as “compliance with the reference values on deficit and debt”.

* A new measure is introduced to ensure that debt is paid off at a certain speed. The standard is to be 5 percent of the difference between the debt and the 60 per cent limit – each year. For countries with a high debt, this can be very serious and could have serious consequences for state budgets.

– Member states outside the eurozone who cannot be fined under the treaty will also be subject to sanctions. This will not be in the form of a fine – that would contradict the Treaty. In stead deductions will be made in different kinds of support the member states receive from the EU, eg. agricultural support. A given member state will then have to support eg. farmers directly with its own funds. Not a fine, but a fine it is.

THE EXCESSIVE IMBALANCE PROCEDURE (TO BE ADOPTED IN JUNE)

On top of the reforms of the Stability Pact, the two remaining proposals in “the sixpack” puts forward a set of separate rules on economic policy – proposals on so called “macroeconomic imbalances”. It’s not carved out what kind of imbalances the proposals are to be dealt with under the proposal, but it is hinted that they can include price competitiveness, speculative bubbles, current account deficits and more.
The significant about the proposal is that it can pave the way for intrusions deeply into priorities on the state budget, labour law and – indeed- it could have influence on collective bargaining.

In this place, I’ll be brief and basic: To make sure that member states economies do not build up an imbalance, indicators are chosen and thresholds defined. If the threshold is crossed by a member state, and if the government of the member state does not react quickly enough in the eyes of the Council and the Commission, it can be subjected to a procedure called ‘the excessive imbalance procedure’ under which it can be fined if it’s a country in the eurozone, or received a sharp criticism if it’s not.

The qualitatively new about this procedure is the fact that it allows the EU – the Council and the Commission mostly – to intervene in areas hitherto considered sensitive and the prerogatives of member state governments and parliaments, like determining priorities on state budgets, including level of social expenditure. And it can exert influence on the labour market, if for instance wage levels are defined as an indicator. But the devilish thing about the proposals on macroeconomic imbalances is that the indicators are not to be defined until the proposals come into force.

This is where the europact comes in.

THE EUROPACT (TO BE FINALLY ADOPTED THE 24th OF MARCH)
Since the proposals were launched in September 2010, there has been many indications that the Commission and important member states want the mechanism on macroeconomic imbalances to cover wages and social expenditure. Statements to that effect were often met with disbelief. To imagine that someone would want the EU institutions to oversee social expenditure and wages sounded like a wild fantasy and unrealistic. The europact shows clearly that it’s not.

As opposed to the other documents, the europact is not a finished legal document, but rather an agreement among member states. The basic elements of the pact are the following:

* The intention is to form a group of countries that acts like a kind of vanguard in the EU on common economic policy and economic governance. The ambitions in the group should be higher than what others are prepared to commit to.

– The eurozone is prepared to go alone with the europact, but others are invited to join.
– The intentions are to “foster competitiveness, employment, and ensure sustainable public finances.”
– The group of countries in the pact is to agree on common objectives each year, and all states in the pact are to draw up annual action plans to reach them.
– While the pact does not specify what means member states are to use, it does emphasise the following as reforms that will be given “particular attention”:
– Wages are to be kept in line with productivity by “reviewing” wage setting agreements, and by ensuring that wages in the public sector foster competitiveness.
– “Flexicurity is to be promoted and tax reforms to lower taxes on labour and raise taxes on consumption are to be implemented.
– The retirement age is to be aligned with life expectancy, and early retirement schemes are to be limited.
– Finally, member states have to translate EU fiscal rules (on deficits and debt) into national legislation.

So, how about enforcement?
The document reads that “a series of indicators covering competitiveness, employment, fiscal sustainability and financial stability” are to form the basis of monitoring member states. Countries “facing major challenges” will have to commit to addressing them within a given timeframe.

EUROPACT AND ECONOMIC GOVERNANCE

If some parts of the europact sound familiar, it’s no coincidence. There is a big overlap that may confuse at first sight. There is nothing in the europact that cannot be implemented through the reforms – the sixpack – that is to be adopted in June.

So why two separate processes?
Why, for instance, does the europact repeat the demand from one of the legislative proposals to have member states adopt rules nationally to enforce the debt and deficit criteria of the Stability Pact?

The answer is that Chancellor Merkel and President Sarkozy who wrote the first draft of the pact, want the architecture on future of economic governance in the EU to be an ambitious one. One that lets wages and social expenditure be issues of common concern and subject to EU decision making. With the europact they’re in a good position. If the final decisions on economic governance in the wider EU are watered down, they can fall back on the europact. For now, they can use the europact to raise the stakes.

Most importantly, as explained above, while the procedure on macroeconomic imbalances fits their agenda, the specifics – the indicators and the specific objectives – have not been identified. With the europact Merkel and Sarkozy have managed to create an alliance that can insist on making wage levels and “sustainability” of social expenditure indicators to be used under the procedure to fight “macroeconomic imbalances”.

THE SUMMIT
Already on the 24th of March, we will have a strong indication whether the latter strategy will work. The eurozone has adopted the europact, but the question remains whether a group of countries that make up a qualified majority in the Council will end up backing it. The eurozone commands 213 votes (or “vote weights”) but needs 255. If they reach that number, everything points to a future economic governance where vital issues like wages and social expenditure will be dealt with in the European Union through elaborate procedures that most will be unable to follow, let alone understand. Mandatory benchmarks will be set, and in the final instance, countries can be fined if they do not stick to the course set by the Commission and the Council. The europact will cease to be a gentleman agreement among heads of state and become the nerve in formal EU legislation on economic governance.

There are yet unknown factors, though. While the six proposals on economic governance went almost unnoticed for months, the europact has made it abundantly clear just how far EU governments are prepared to go. A whole new debate started, and more people are getting involved.
At the outset all measures have received warm support from the major players in the business community. The European employers association BusinessEurope, and the lobbygroup European Roundtable of Industrialists see in the new emerging architecture for a common economic policy a realisation of old dreams. Not only is their version of competitiveness placed at the heart of the reforms – there are new and strong methods of enforcement included. On the other hand, trade union opposition is mounting, and many parts of society have voiced concern. It just may be that by June, the whole set up is so controversial that major changes are made, or the whole thing is scrapped.